Summit Preps
November 12, 2008
As the world's leading economic nations and the EU prepare to convene for the emergency economic summit in the American capital, European politicians are stressing their commitment to unity -- at least in words.
Even Britain, traditionally somewhat of an outsider in Europe, is talking togetherness.
"If we have fiscal stimulus in Britain and it is not repeated in other countries, then it will have far less effect and far less benefit than if it were done in every other major economy in the world," British Prime Minister Gordon Brown said on Tuesday, Nov. 11.
Those sentiments were seconded by statements coming out of Brussels.
"If the EU, and in particular the euro area, is not coordinating the different actions, all the euro-area countries will lose," said EU Economics Affairs head Joaquin Almunia.
But the very mention of the euro zone, of which Britain is not a part, underscores the differing European economic attitudes that could make it difficult for the bloc to put up a unified front.
France and Italy are, generally speaking, far more positively inclined toward state intervention in the economy than England or even Germany.
Thus, while some EU states may see the financial crisis as an occasion for governments to rein in out-of-control capitalism, others are more likely to view it as a problem to be overcome while preserving the basics of the current system.
To turn left, or not
And the disagreements occur not only between nations but within the individual societies that make up the EU. Opinion is divided even in Britain, usually considered to be on the free-market extreme of the EU spectrum.
British Labour legislator John McDonnell is one of those who hopes that the response to the financial crisis goes beyond emergency cash infusions.
"There are opportunities for the left to explain how the economic system works at present, how unfair it is and what the alternatives are, "McDonnell told Reuters news agency.
But others warn that the crisis could be used as an excuse for pursuing a neo-socialist agenda.
"Some governments are actually quite keen to exploit the precedent that has been set to reestablish a more … interventionist industrial policy, or economic policy more generally," Simon Tilford, chief economist at the London-based think tank Centre for European Reform, told Reuters.
The outlook is gloomy
However much EU member states may disagree about solutions to the crisis, the latest economic news -- especially in the bloc's largest economy -- is consistently bad.
On Wednesday, the five leading economic institutes in Germany are expected to announce that they do not expect the country's economy to grow at all in 2009.
Industrial output was also down across the continent in September, with the drops ranging from 0.5 percent in France to 3.6 percent in Germany.
The one somewhat bright spot was provided by Germany's Center for European Economic Research, which announced a slight improvement in its poll of investor sentiment. At a near record low last month, the mood has improved slightly as investors have observed the government taking action to respond to the crisis.
But many experts, including Unicredit economist Alexander Koch, still believe an economic downturn is inevitable, if indeed not already here.
"There is no doubt about it," Koch told AFP news agency. "The German economy is sliding into depression."
On Thursday, the German government will publish its third-quarter growth figures. If they turn out to be negative, Germany will officially be in recession, which most economists define as two consecutive quarters of economic shrinkage.